Railways may lease out warehouse spaces to e-commerce companies

The move is seen helping the railways become an end-to-end logistics provider and monetise its real estate.Rajat Arora | ET Bureau | October 24, 2016, 10:12 IST

E-commerce companies such as Flipkart, Amazon and Snapdeal may soon get to set up warehouses and pickup points at railway stations.

A senior official of the Railway Board said the railway ministry is working on a scheme to lease out its abandoned buildings and spaces near railway stations to e-tailers. Meanwhile, the non-fare revenue cell of the Board is in talks with the ecommerce companies in this regard, the official said.

The move is seen helping the railways become an end-to-end logistics provider and monetise its real estate, while also reducing the delivery time for e-commerce companies as their warehouses and pickup points are mostly on the periphery of big cities.

“We want to be end-to-end logistics providers. Presently, we see a huge gap in the market where e-commerce companies are unable to get spaces in the city because the cost is too high,” the official, who did not wish to be named, told ET. “We are offering them our abandoned building and other spaces to set up warehouses and pickup points, that too at a cost-effective price.”

According to the official, EY and BCG have been roped in as consultants to work on the proposed scheme, which is expected to be announced soon.

“Railways offers a cost-effective solution to ecommerce by allowing them to set up pickup points at stations. With this, railways would also become a part of the growing logistics supply chain of white goods, hence getting additional revenues,” said Jaijit Bhattacharya, partner, KPMG. “It's a win-win situation for both railways and etailers.”

At present, the railways leases out space only to India Post. The official quoted earlier said that e-commerce companies that opt to use the railway network for transportation of parcels could get a sweetened deal under the proposed arrangement.

For the railways, apart from monetisation of vacant land and building spaces, the move could boost its freight revenue, which has remained capped in recent years due to no growth in movement of core commodities. Currently, over 90% of the movement of white goods is through roadways.

The ministry will also be offering space near rail side in smaller cities so that e-tailers, along with other new-age courier companies, can set up their hubs.

“The companies could have more efficient supply chain once their warehouses and pickup points are in the middle of the cities. They could also set up hubs in small cities through our rail-side warehouses,” the official said.